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Duplicates/Conflicts with/Companion to/Relates to

SOURCES OF INFORMATION

General Services Department

New Mexico State Highway and Transportation Department

SUMMARY

Synopsis of the Amendment

The House Business and Industry Committee's amendment to the House Transportation Committee substitute for House Bill 507 serves to clarify language regarding bidders.

Synopsis of Bill

The House Transportation Committee Substitute for House Bill 507 proposes to amend Section 13-4-2 NMSA 1978, revising the definition of "New Mexico Resident Contractor". The substitute bill makes it easier for a contractor bidding on state funded public works construction to claim resident contractor status. The proposed legislation provides for a bidder show that it is a highway contractor, has staffed an office and has paid applicable state taxes for two years prior to bidding, and has five or more employees who are residents of the state, to obtain a five percent preference over non-residents.

Significant Issues

The staff from the Highway and Transportation Department has provided the following significant issues:

The Attorney General's Office representing the Highway and Transportation Department is presently litigating the constitutionality of the current version of the Resident Contractor Preference. The substitute bill would alter the statute to make it conform more closely with the position taken by the Plaintiff in that litigation, C.S. McCrossan. SHTD has taken no position with respect to this litigation except to defer to the Attorney General who maintains that the preference stature as currently worked is constitutional.

A policy decision needs to be made whether to restrict resident contractors to new Mexico corporations owned by New Mexicans, or open up the class to more contractors having somewhat more tenuous ties to the State.

The General Services Department (GSD) staff indicates:

Regardless of its New Mexico Construction Industries Division ("CID") license classification under current statute, to qualify as a "resident contractor", a contractor must maintain its principal office and place of business in New Mexico. A corporation shall be incorporated in New Mexico and a majority of its outstanding shares [of stock] shall be beneficially owned by one or more individual citizens who are domiciled in the state. If the contractor is a partnership, general or limited, or other legal entity the partners or associates owning a majority beneficial interest shall be domiciled in the state. If the contractor is an individual, the individual shall be a citizen of and domiciled in the state. The current test as to whether or not a company is a resident contractor is based on "residence", "ownership" and "control".

This legislation proposes to relax the current and very strict qualification requirements cited above for any contractor deemed to be a Highway Contractor. Under this legislation a contractor engaged in highway construction can qualify as a "resident contractor" it ir has staffed an office and has paid applicable state taxes for two years and has five or more employees who are residents of the state. The applicable CID license designation is "GA" and if the contractor has a GA-98 license the company is authorized to construct or repair streets, roads and highways, including tunnels; parking lots, alleys, sealcoat and surfacing; maintenance and repairs; curbs, gutters and culverts; striping, highway signs and guard rails.

There are no safeguards in existing statute or in the proposed legislation to preclude a "highway contractor" who has qualified as resident contractor under the relaxed requirements as proposed to also attain a general building license (GB-98) or any and all of the additional construction licenses issued by CID. This could be particularly troublesome if the contractor utilized its Resident Contractor certification number when competing against other contractors who qualified as a resident contractor only after meeting the strict requirements for certification for other than a highway contractor.

The proposed deletion of language as reflected on Page 4, line 14 has the effect of limiting the documentation or proof the State Purchasing Agent might request in order to be assured the contractor qualifies as a resident contractor per Subsection F of Section 13-4-2. NMSA 1978.

FISCAL IMPLICATIONS

Highway and Transportation Department staff indicate more contractors will have resident contractor status and be entitled to the 5 percent preference. This will serve to increase the pool of contractors who can effectively compete on an equal footing for state-funded public works construction, and will result in lower awards from the increased competition.

Staff from GSD states: The Office of the State Purchasing (Agent) is charged with reviewing all applications for resident business certification, resident manufacturer certification and resident contractor certification and issuing a distinctive certification number to the qualified applicant, which is valid until revoked. As of the date of this analysis the files of the Office of the State Purchasing Agent reflects there are approximately 7,000 such distinctive certification numbers issued to qualified applicants. The file also contain several hundred applications for preference that were rejected for not meeting the requirement for certification. If enacted, this legislation would necessitate review of all existing applications and perhaps a cancellation of all existing and requiring everyone to reapply. The fiscal impact, while hard to estimate, could be significant.

ADMINISTRATIVE IMPLICATIONS

May be significant to the Office of the State Purchasing Agent while none is anticipated for the State Highway and Transportation Department.

TECHNICAL ISSUES

The State Highway and Transportation Department believes that the language in the proposed legislation will be clearer if requiring the bidder to have actually staffed an office in New Mexico instead of just anywhere.

WJC/njw